Are Attorney Backed Debt Settlement Programs Safe?

The other day I had a quick chat with a client who was contemplating enrolling in a debt settlement program. The debt settlement industry has a bad reputation due to unscrupulous companies who were not delivering on their services, overpromising, and charging outrageous fees. This was one of the main triggers for the FTC step in and amend their "Telemarketing Sales Rule" which prohibits debt settlement companies to charge upfront fees before settling a debt.
As I got a little more information from the client, I soon realized that he wasn't the best fit for a debt settlement program. He had about $15,000 in credit card debt, was one month behind on payment, and had two cars that were completely paid off.
He advised me that the company he was talking to was an "attorney backed" company and offered a money back guarantee. It might seem like a pretty strong selling point with nothing to lose, but there are hidden dangers associated with his specific situation.
First and foremost, just because a company is attorney backed does not mean that an actual attorney will be negotiating their debts. This simply means that a company is piggybacking off their license to charge a retainer fee or a monthly maintenance fee. It gives a false sense of security that an attorney will represent you and back all your problems, making them magically go away.
This is not true. Rarely does an attorney talk directly with your creditors. Think about it: Their time is valuable and they can't spend hours on the phones talking to your creditors -- instead they hire paralegals or salespeople to do the leg work for them.
There are major setbacks when going through a debt settlement program. Besides the obvious fact that your credit score will be ruined, there's a possibility that your creditors might sue you and garnish your wages. You will also be liable for taxes on any debt forgiven over $600. The reality is that most debt settlement programs fail because companies are not screening their clients.

Some of these attorney backed companies might tell you that they will represent you in court if you get a court summons but this isn't free. They will usually charge you a retainer fee to show up in court, and even if they do, there's no magic formula they have to make everything better. Instead, they might advise you to file for bankruptcy. Seems like a great way to monetize on a client, right?
By no means am I saying that debt settlement programs are bad. In fact, I think debt settlement is an effective approach to debt relief for those who are fit for it. The problem with most companies is that they do a poor job screening their clients to pick the best ones who can graduate from the program.
If you're thinking about enrolling in a debt settlement program, make sure you research all your other options and take a second look at your budget. A quick fix in your spending could give you the extra cash flow you need every month to pay off your creditors. SpringCoin will help you choose the right program and give you personalized spending insights to get your finances back in order.

California not among states that OK bank settlement

More than 40 states signed onto a proposed $25-billion deal with major mortgage servicers over faulty foreclosure practices. New York, Nevada and Delaware joined California in holding out for better terms.

 

Reporting from Los Angeles and Washington—

More than 40 states signed onto a proposed $25-billion settlement with major mortgage servicers over faulty foreclosure procedures, but California, New York and other key states were still not among them.

"This enables us to move forward into the very final stages of remaining work," said Iowa Atty. Gen. Tom Miller, who heads the multi-state settlement negotiations. "Federal and state officials, as well as representatives from the banks, continue to address matters that they must complete before finalizing any settlement."

Miller would not comment further.

The proposed settlement had hung in limbo most of the day as California and other key states pushed past the Monday deadline — an extension of a Friday deadline — to try to get better terms for homeowners from the nation's five major loan servicers.

Miller's decision to move forward, however, doesn't stop California and the other states from joining the agreement later.

California Atty. Gen. Kamala Harris was locked in last-minute negotiations with servicers and officials from other states and the Obama administration as the deadline expired with no decision on whether they would sign on, according to a person familiar with the discussions.

Negotiations, however, remained fluid, said the person, who was not authorized to speak publicly and requested anonymity.

Officials in California, New York, Nevada, Delaware and other states appeared to feel little obligation to meet Miller's deadline, which was set to see whether enough attorneys general would sign onto the deal to make a settlement feasible.

Copyright © 2012, Los Angeles Times

Prepaid phone card marketers to pay $2.32 million over false claims about total minutes

Several marketers of prepaid calling cards will pay $2.32 million as part of a settlement to resolve charges that they made false claims about the number of minutes on prepaid cards they advertised to immigrant communities, the Federal Trade Commission said today.
The settlement resolves FTC claims brought against defendants Millennium Telecard, Millenium Tele Card, Coleccion Latina, and Telecard Center USA, and their principal Fadi Salim.
The settlement does not constitute an admission by the defendant that the law was violated.
Last May, the FTC filed a complaint in U.S. District Court in New Jersey, charging that the defendants targeted immigrants using calling cards such as Africa Magic, Hola Amigo, and Viva Ecuador. The defendants' prepaid calling cards are sold online, at newsstands, grocery and convenience stores, and kiosks nationwide, in addition to the defendants New Jersey store where they are sold wholesale and retail.
Advertisements (both online and point-of-sale posters) made claims about the number of minutes calling cards provided to locations including Argentina, Brazil, the Dominican Republic, Ecuador, Mexico, Pakistan, Poland, Vietnam, Ghana, Nigeria, and El Salvador. But consumers didn't receive the minutes advertised.
In testing by the FTC, the cards were found to have, on average, only 45 percent of the advertised minutes. Of the 141 cards tested, more than 98 percent failed to deliver the number of minutes advertised on the point-of-sale posters. The FTC also alleged the cards carried hidden fees, such as "hang-up fees" and weekly fees disclosed in tiny print and vague terms difficult to understand in any language.
As part of the settlement, the defendants are also required to "clearly and prominently" disclose fees or charges, and are barred from misrepresenting the amount of time on prepaid cards.
This settlement is part of an ongoing FTC effort to address deceptive advertising and marketing in the prepaid calling card industry.
source - Prepaid Phone Card Marketers Agree to Pay $2.32 Million to Settle FTC Charges [FTC]

National Consumer Law Group A Professional Corporation Business Review in San Francisco, CA - San Francisco, Oakland, San Mateo, and Northern Coastal California BBB

National Consumer Law Group A Professional Corporation Business Review in San Francisco, CA - San Francisco, Oakland, San Mateo, and Northern Coastal California BBB

8 Good Rules of Thumb for Debt Settlement

Making the decision to start the debt settlement process is a big one, so make sure you go into it prepared. "The last thing you want to do," says CreditInfoCenter.com's Kristy Welsh, "is get the ball rolling only to discover it's moving in the wrong direction."

1. Put everything in writing. Avoid phone calls with collection agencies altogether. Not only can the reps be bullies (and who needs that stress?), but phone conversations don't carry the same weight as a written debt settlement agreement.

2. Send it registered mail. This is the only means you have of proving that the collection agency received your communication.

3. Keep your cool. Never communicate a sense of desperation or urgency to settle your debt. The more you imply you're willing to take your time, the better.

4. Offer to settle for no more than 25 percent of the debt. Most collection agencies only get pennies on the dollar for the debts on their books. Getting 25 percent of the debt from you still makes them a tidy profit.

5. Ask for the negative listing to be removed from your credit report. Once your debt is paid in full, there is nothing to stop a collection agency from removing the negative listing from your report. You have to ask. Get it in writing.

6. Get terms in writing before making a payment. If you have negotiated a deal with a collection agency, make sure you have a letter outlining the agreed-to terms.

7. Pay in one lump sum. Collection agencies may try to talk you into making payments on your debt. They will not only charge you interest, but it may also restart the statute of limitations. Save up and only start the debt settlement process once you have a lump sum!

8. Keep good records. Record every communication you have with the collection agency, including dates and types of correspondence.

CreditInfocenter.com was founded in 1997 as a one-stop destination for consumers looking for free advice on repairing credit and rebuilding good credit. Creditinfocenter Founder Kristy Welsh is the author of several books on personal finance, including Good Credit Is Sexy, a tongue-in-cheek guide to managing credit.

For More Information on CreditInfoCenter.com:

http://www.creditinfocenter.com/